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Retirement nest egg at risk under negative gearing proposal

By Monica Boyd

With negative gearing only available for investment in newly-built residential property existing investors will find it more difficult to sell their properties as other investors will show little interest in existing property with inevitable falls in value to follow.

The provisions in Labor’s policy to “grandfather” negative gearing on current investments will not protect the interests of existing investors in real estate and will put at risk planned for retirement nest eggs according to the real estate industry.

With negative gearing only available for investment in newly-built residential property existing investors will find it more difficult to sell their properties as other investors will show little interest in existing property with inevitable falls in value to follow.

These falls in value will in time translate to a lower standard of living in retirement as many mum and dad investors have purchased property as a means to improve their retirement living as independently funded retirees. This will also apply to superannuation funds with any exposure to residential property including many self managed superannuation funds.

Angus Raine, CEO Raine and Horne said the reality is the proposed changes to negative gearing will take significant lustre off property as an investment option, and will drive investors into other asset classes.

“We should also remember that property investors are not just landlords – everyone who has any financial interest in property (including the 67% who own their own home as well the 18 million who have a stake in property through their super) is ultimately a property investor too,” added Dan White, Director Ray White Group. “If this policy were to become reality, immediately a third of the buyers who were previously competing won’t be there when the time comes to sell. The only outcome of such a massive decrease in competition can be price falls, and areas where there are more investment properties will suffer the most.”

Mike Green, CEO of Harcourts International, said “If the intention was to curb so called excesses, the proposal will not have any impact – yet it will penalise the mum and dad investors saving for their retirement.”

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